Question

Linds delivers pizzas for a pizza shop. On Wednesday, December 31, 2015, Linda made several deliveries and collected 400 from customers. However, Linda forgot to turn in the proceeds for the day to her employer until the following Friday, January 2, 2015. The pizza shop owner recognized the income of400 when he receives it from Linda in 2016. What is the total income recognized by the pizza shop owner in 2015?

1) $0
2) $400
3) $800
4) Cannot be determined

Answer 1

The pizza shop owner recognized $0 of income in 2015 because Linda turned in the proceeds in 2016 and income is recognized when it is received.

Step-by-step explanation:

The question revolves around when the pizza shop owner recognizes income from the deliveries made by Linda. According to the information provided, Linda collected $400 on December 31, 2015, but did not turn in the proceeds to her employer until January 2, 2016.

Since the income was received in 2016, and assuming the pizza shop uses a cash basis accounting method, the total income recognized by the pizza shop owner in 2015 would be $0.

The total income recognized by the pizza shop owner in 2015 is $0. Even though Linda collected $400 from customers in December 2015, she did not turn in the proceeds to her employer until January 2016. Therefore, the income is recognized in the year it is received, which is in 2016, not 2015.